Wills, Trusts & Estates Prof Blog

CLE on Representing Estate and Trust Beneficiaries and Fiduciaries

The American Legal Institute will be hosting a CLE in Langham, Boston entitled, Representing Estate and Trust Beneficiaries and Fiduciaries, July 18-19, 2013.  A description of the CLE is below:

Why You Should Attend

Estate planners, litigators, and corporate fiduciary counsel all want to know what impact (if any) the American Taxpayer Relief Act of 2012 will have on their clients.

This advanced CLE course goes beyond basics and delves into topics that specifically affect beneficiaries and fiduciaries, while offering registrants solutions to their most pressing concerns through small roundtable discussions and networking opportunities.

Experienced planning chairs Steve Fast and Bob Whitman, and the rest of the nationally known faculty panel, provide two full days of knowledge, insight, and even a bit of humor as they update you on all the current law developments affecting beneficiaries and fiduciaries.

What You Will Learn

The go-to program for estate and trust administration professionals is back by popular demand! Get the latest insight on the issues, including strategies for addressing current challenges for unhappy beneficiaries and concerned fiduciaries. Expert faculty of seasoned practitioners from across the country will examine: 

• Emerging fiduciary issues and how to pick (or be picked as) the best lawyer for the job
• Hot topics in tax, ethics, and estate and trust administration
• What you don’t (but should!) know about income taxation of estates and trusts
• The current fiduciary litigation landscape—and what you should do differently
• Perils of the lawyer-trustee
• The emboldened beneficiary
• Deposition devils and details
• Decanting illusions
• “Side letters” to trustees
• The intersection of the prudent investor and business interests
• Failing facility – drawing the lines on diminished capacity
• Using taxes to settle disputes
• Ethics analysis (one hour)
• Your issues, one-on-one

Faculty will reserve time throughout the program to address your questions.

Registrants at the live program have the opportunity to take part in small, focused, and interactive discussions during breakfast.

When Can a Fiduciary Duty Be Discharged In a Bankruptcy Proceeding?

Recently, the Supreme Court has decided when the fiduciary duty can be released during a bankruptcy proceeding. Chris Bullock was the trustee of his father’s trust. The trust provisions did not allow the family from borrowing from the trust. Despite the provision, Chris made a loan to his mother to reimburse a debt. In addition, he made a loan to himself. As a result, Chris made several improper loans.  All of the improper loans were made at the same interest rate the trust was earning.  

 In Bullock v. BankChampaign, the Supreme Court determined the definition of “defalcation” within Section 523(a)(4) of the Bankruptcy Code. The court held that “defalcation” means a state of consciousness “as one involving knowledge of, or gross recklessness in respect to, the improper nature of the relevant fiduciary behavior.”  The court rationalized its decision by including scienter as a requirement. In effect, a fiduciary will still be held accountable for a breach of his duty where the standard is simple negligence.

See Luke Lantta, Defalcation, Bankrupcy, And Fiduciary Litigation, Bryan Cave Fiduciary Litigation, May 20, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Public Guardian Investigated For Excessive Billing

Jeanan Mills Stuart, a Davidson County public guardian, is currently being investigated for billing her wards excessively. Her duty as a public guardian is to take over the financial affairs of people who are mentally or physically handicapped. Stuart has billed for more than 24 hours in one day and has gained over $270,000 dollars for doing small tasks like checking emails.The inquiry began when Stuart was charging over $200 an hour for doing non legal tasks. Experts have asserted that Stuart's billing for non legal tasks is not typical. A judge is currently evaluating Stuart's billing practices.

See Walter F. Roche Jr., Davidson County Public Guardian's Bills Exceed $1.8 Million ,The Tennessean, May 11, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Comparing Conflicts of Interest in Medicine, Research, and Law

There are other conflicts of interest outside the what attorneys usually think of when conflicts of interest are discussed within the elder law context. For example, conflicts of interest could happen when elderly patients "with impaired decision-making capacity [enter into] clinical and experimental medicine when legal counsel and advance health care and research participation planning have not taken place." Often, these conflicts of interest emerge when these patients do not have an advance directive or an advanced biomedical or behavioral research directive. Furthermore, these conflicts of interest are made more complicated by the fact the states have different approaches to managing these conflicts. Additionally, problems can emerge from the differing standards of professional conduct between attorneys and medical professionals.

See Stacey Tovino, Conflicts of Interest in Medicine, Research, and Law: A Comparison, 117 Penn. St. L. Rev. 1291 (2013).

Special thanks to Katherine Pearson (Professor of Law, Penn State University - The Dickinson School of Law) for bringing this article to my attention.

Court Seeks To Remove A Fiduciary Suspected of Evidence Tampering

In Connecticut, a probate judge wants to remove Candace Bednarz from being the fiduciary in her murdered mother’s estate. The court has already ruled payments to creditors are the only distributions to be made out of the estate. The judge recently found out that Bednarz was arrested by police her for tampering with evidence in her mothers murder prosecution. Brett Bednarz, Candace’s brother, has pending charges against him for killing his mother, Beverly Therrien.

Therrien’s most recent will has not been found and her 2006 will was deemed invalid. As a result, state law specified her children as her heirs. The 2006 will cut Candace Bednarz from receiving any estate assets. However, Candace Bednarz petitioned the court to control the estate's assets claiming the entire estate only held $35,000 dollars. According to her arrest warrant, she has withdrawn well over $90,000 dollars in cash. 

See David Owens, East Hartford Probate Judge Seeks To Remove Candace Bednarz From Contorl Of Mother's Estate, Courant.com, Apr. 30, 2013.

Understanding Duties and Conflicts of Interest

It is important for estate planners to understand the an agent's duties to the principal and conflicts of interest that can arise. It is especially important for those drafting powers of attorney so that the document meets the agent's objectives and provides guidance to the appointed agent. A current problem is that drafting attorneys often overlook and do not adjust the agent's duties to accommodate the expectations of the principal. Because of this, conflicts of interest tend to arise between the customary duty of loyalty and what the principal expects of his or her agent. One possible solution is to "improve the agent's understanding of the authority granted in the power of attorney, the principal's expectations for exercise of that authority, and the duties an agent must meet when carrying out the principal's expectations."

See Linda S. Whitton, Understanding Duties and Conflicts of Interest - A Guide For The Honorable Agent, 117 Penn St. L. Rev. 1037 (2013).

Special thanks to Katherine Pearson (Professor of Law, Penn State University - The Dickinson School of Law) for bringing this article to my attention.

Solicitor Charged With Fraud

A solicitor and coroner named Alan Crickmore from Cheltenham in England has been charged with fraud and the theft of over £3.7 million. Together Crickmore was charged with "seven counts of fraud by abuse of his position and one count of fraud by false representation between 1998 and 2011." Crickmore has been accused of altering the wills of his deceased clients. It is also alleged that he stole from his clients while he was acting as the executor of their estate.

In light of these charges, Crickmore has lost his certificate to be the coroner for Gloucestershire and his firm was closed by the Solicitors Regulation Authority. He recently appeared along side another man named Terrence Morris, who was charged with one count of fraud. Morris and him "were given unconditional bail until" June 12, 2013.

See Catherine Baksi, Solicitor Appears on £3.7m Fraud Charge, The Law Society Gazette, Apr. 19, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

A Glance at the First Case of a Trilogy in Shaping Trustee's Fiduciary Duty in a Revocable Trust

Recently, courts addressed whether a trustee of a revocable trust can be liable and must account to the remainder beneficiaries after the settlor's death. After three cases, the court developed and shaped this rule: the trustee has a fiduciary duty to the settlor only when the trust is revocable. However, even after the settlor's death, the trustee still does not have a duty to the remainder beneficiaries in a revocable trust. Below is a short summary of the first case's holdings.

In Pennell v. Alverson, the court held that the Angella Alverson, one of the settlor's daughters, and ultimately a sole trustee, did not owe a fiduciary duty during the settlor's lifetime to the remainder beneficiaries. The court found that the trust terms did not require a fiduciary duty on the trustee to the remainder beneficiaries during the settlor's life. Additionally, the trustee only owed a duty to the settlor during that time. However, the remainder beneficiaries had standing to bring claims of breaches of duty during the settlor's lifetime.

See Kathy Sherby and Stephanie Moll, Is the Trustee of a Revocable Trust Answerable to the Remainder Beneficiaries? Ever?, Trustbryancave.com, Apr. 19, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Financial Advisers Now Under The Scope

Some have called for stricter regulations of the methods that financial advisers use to report their credentials and their experience working with older Americans. Some “financial advisers use more than 50 different credentials, some of which they can simply buy online.” The large disparity between the different credentials have possibly left many older Americans confused, which could leave them open to abuse by unscrupulous advisers. For example, there is a considerable difference in the amount of education between an Accredited Retirement Advisor and an Accredited Estate Planner.

A recent study would like for both state and federal agencies to set standards for the amount of education that a person can have before they can obtain certain designations that would show that they have expertise in working with senior citizens. The report also recommended that both levels of agencies set rules of conduct for advisers on what designation advisers can claim. Furthermore, the report also asked for the creation of a tool that seniors would be able to use to determine exactly the credentials of an adviser and the training he or she has received. 

See Emily Stephenson, Financial Advisers’ Credentials Mislead Seniors, Watchdog Says, Hartford Courant, Apr. 18, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Lawyer Who Stole From Aunt Will Likely Be Sentenced To Jail

Rik Bachman, a prosecutor, pleaded "no contest" "to second-degree larceny for stealing more than $200,000 from the accounts of his 85-year-old aunt." In 2009, Bachman took control of his aunt's, Beatrice Bachman, accounts. After assuming control, he allegedly kept her secluded from her other family members so that he could make large withdrawals from her accounts. Even after a judge ordered that Beatrice's accounts be frozen for her own protection, Bachman still continued to withdraw money. He apparently used the money that he stole to purchase sports memorabilia, which he had shipped to Beatrice's assisted living facility.

Bachman is set to be sentenced on June 28, 2013. The Senior Assistant State Attorney, Howard Stein, will likely demand that Bachman serve a three-year prison term or the maximum amount that he can serve. Stein argued that the maximum is necessary because of Bachman is an attorney. He claimed that Bachman should have been aware of the unlawfulness of his conduct.

See Daniel Tepfer, Lawyer, Who Stole $200K From Aunt, Faces Jail, Connecticut Post, Apr. 18, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Five Ethical Rules to Consider In Estate Planning

The Rules of Professional Conduct primarily apply to litigation matters. However, Mandaq provides a list of five ethical rules you should consider at all stages of estate planning: 

1. Competence: Rule 1.1

2. Conflicts of Interest: Rule 1.7

3. Testamentary Capacity: No rule listed. 

4. Diligence: Rule 1.3

5. Continuing Obligation: Rule 1.4

Please click here to see a more detailed discussion of how these rules should be used in estate planning. 

See John Hughes, United States: Five Important Ethical Considerations in Estate Planning, Mondaq, Apr. 10, 2013. 

Health Care Advisor and An Attorney Conned Sick Elderly Man

Jerry and Frances Berkowtiz of West Palm Beach, Florida have recently brought allegations against Princella Lewis, a financial advisor at Prestigious Lifecare for Seniors (PL Firm), and Glenn Ricardo Miller, their attorney, for conning them out of $1 million. The couple claims that the Lewis and PL Firm coerced them into giving PL Firm money. This whole story begins this past year when Jerry was diagnosed with cancer and hospitalized. After his stay at the hospital, he was transferred to a nursing home. Shortly after his arrival, Jerry was referred to the PL Firm and Princella Lewis, who agreed to provide Jerry and his wife financial advice. Glenn Miller was retained by Jerry to prepare any legal document that might of be necessary.

When the documents were signed, Lewis and PL Firm persuaded Jerry's wife to make a cashier's check worth $55,000. The cashier's check was suppose to be the money needed to establish a trust, but this did not stop here. Not only did the couple make a cashier's check payable to PL Firm, an employee drove Frances to her personal bank with the instructions to transfer all of her money into one bank account that was held by SunTrust Bank and her. Under the supervision of PL Firm, Frances transferred more than $1 million in funds. The complaint alleges that once PL Firm had the money, they refused to work with the couple, give them copies of what they had signed, or an accounting. When Frances tried to reclaim the money, Lewis threatened to have her committed in a mental institution. The complaint filed against Lewis, PL Firm, and Miller alleged that the three abused their position and took advantage of the couple. The complaint highlights the fact the illegality of PL Firm's actions, including the threats made against Frances. The couple is seeking damages and their finances returned to them.

See Iulia Filip, Sick Old Man Says He Was Conned for $1M, Courthouse News Service, Apr. 2, 2013.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

Lawyer Faces an Ethics Complaint For Material She Posted on Her Blog

A Chicago blogging lawyer is facing an ethics complaint for describing what she believes to be Illinois' corrupt probate system. Joanne Denison, patent and trademark attorney at Denison & Associates, has been accused of undermining the administration of justice. The blog entries at issue identified court-appointed guardians by name and labeled them as "tortfeasors."  

Denison says she does not intend to take down her blog. The ethics commission describes Denison's comments as false or a reckless disregard of the truth, and they have set a hearing on the matter. 

See Bram, Blogging Lawyer Faces Discipline for Writing About Corrupt Legal System, Bram, Feb. 1, 2013. 

Special thanks to David S. Luber (Attorney at law, Florida Probate Attorney Wills and Estates Law Firm)
for bringing this article to my attention.

Attorney Pays for Stealing Almost $900,000 From Clients

Maureen F. Pomeroy, 46, has been disbarred, will pay $277,292 in restitution to her victims, serve one year in a house of correction, and spend another year-and-a-half under house arrest.  Pomeroy faces all of these consequences for taking advantage of clients who trusted her with access to their money, hoping she would assist them with their best interests at heart.  Instead, she stole almost $900,000 from several people.  On March 4, Pomeroy pleaded guilty to two counts of larceny from a person over 60, one count of larceny, and one count of embezzlement by fiduciary.  

See Todd Feathers, Disbarred Attorney Will Serve One Year in Prison for Stealing Nearly $900,000, Metrodesk, Mar. 12, 2013. 

Cedar Rapids Attorney Disbarred

Susan L. Hense, an attorney from Cedar Rapids, Iowa, has admitted to misconduct and subsequently consented to being disbarred on December 27, 2012. Ms. Hense stated publicly that she deserved disbarment for stealing client's funds to support her gambling addiction. In total, Ms. Hense misappropriated $800,000 from her clients.

Ms. Hense has also entered "one-day-at-a-time" meetings to treat her gambling addiction. She claims that she has stopped her trips to casinos and gambling since she started treatment in October of 2012. Hense seems remorseful, and has offered to help the police in their criminal investigation. She also hopes that her involvement will help her former clients. The authorities at both the state and federal levels have not filed charges against Ms. Hense yet.

See Cedar Rapids Attorney Disbarred: Admits to Taking $800,000 Out of Clients Accounts For Gambling, The Gazette, Feb. 22, 2013.

Special thanks to Matthew D. Piersall for bringing this article to my attention.

Attorney Arrest For Embezzlement

Warwick attorney, Janet Mastronardi, has been arrested for embezzling almost $150,000 from a client. She has been charged with embezzlement and unlawful appropriation. A review of her bank accounts revealed that she stole $144,989.21 of her client's money and, over a period of 11 months, wrote a series of 25 checks to herself. It is also alleged she closed two of her elderly client's investment accounts worth $224,058.57 and deposited her proceeds into two new bank accounts. The money was not listed on her client's probate account.

For the embezzlement charge, Mastronardi faces a maximum of 25 years in prison and up to $50,000 in fines.  The unlawful appropriation charge could add 20 years in prison and over $400,000 in fines. 

See Dee DeQuattro, Attorney Arrested For Embezzling More than 100K from Client, abc6.com, Mar. 6, 2013. 

Derzon Coins Sues Law Firm

As I have previously discussed, the true heirs of the Derzon Coins shop have sought retribution from Lori Laatsch and Diane Mehalko for the time they owned their parent's shop. Now it appears that the heirs to the estate has brought suit against "Cramer Multhauf & Hammes for more than $7 million plus at least $1 million in legal fees," claiming that the firm refused to divulge vital information about the case.

An attorney for the Cramer law firm stated that the firm's lawyers acted appropriately throughout the estate dispute between the rightful heirs and Laatsch and Mehalko. Cramer's lawyers claim that the firm has been portrayed unfairly by the media, and that they cannot wait to prove the falsity of these claims. One the people who has portrayed the Cramer law firm poorly is Milwaukee County Judge Carroll. Judge Carroll, the presiding judge throughout the dispute, openly chastised Cramer's lawyers in open court, claiming that the attorneys had altered or destroyed documents.

See Cary Spivak, Derzon Coin Heirs Sue Waukesha Law Firm, Journal Sentinel Online, Feb. 20, 2013.

Special thanks to Brian Cohan (Attorney at Law, Law Offices of Brian J. Cohan, P.C.) for bringing this article to my attention.

Former Zeeland Attorney Sentenced to 6.5 Years in Prison

I previously discussed how former Zeeland attorney Kenneth Hoesch was set to plead guilty to charges of mail fraud.  He did plead guilty, and now a federal judge has sentenced Hoesch to 6 1/2 years in prison. Hoesch stole $800,000 from clients' estate trusts under the pretense of helping family members to get estates in order.

Federal sentencing guidelines advised a minimum sentence ranging from 63-78 months and the government was seeking a 70-month sentence.  Hoesch's defense attorney says Hoesch is truly remorseful, and Hoesch addressed the victims with an apology. 

See Former Zeeland Attorney in 'Very Dark Place' To Steal From Dying Clients Planning Estates (MI), estateofdenial.com, Feb. 17, 2013. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.

Trustee's Duty To The Beneficiaries of a Trust

When trustees of a trust have a dispute, it is the duty of the trustee to follow the terms and the purpose of the trust and do what is in the best interest of all of the beneficiaries. However, often the trustee is compelled by the circumstances of the dispute to take a position, which may place him or her in an adverse position to one or more beneficiaries of the trust. So, the question remains as to how far a trustee can advocate for that particular side?

As I have previously discussed, the Supreme Court of New Hampshire recently ruled against one of the beneficiaries of a trust with an in terrorem clause. In this case, Elizabeth Tamposi challenged the terms of the trust and forfeited her right to draw from the trust. The trustee also challenged the ruling. Before the case could get to court, the beneficiary withdrew her appeal. The trustee, however, chose to move forward with the appeal. At the supreme court, "the other beneficiaries contended that the trustee did not have standing to challenge the ruling that the in terrorem clause was violated." The supreme court agreed with the other beneficiaries. The court noted that a trustee must act impartially "with respect to the various beneficiaries of the trust." The court reasoned that because the adverse ruling only affected one of the beneficiaries and she abandoned the appeal, "there was no reason for the trustee to pursue the appeal on her behalf." Therefore, the trustee lacked standing to bring the appeal.

See Luke Lantta, A Cautionary Tale About Trustees Picking Sides Between Beneficiaries, BryanCaveFiduciaryLitigation.com, Feb. 7, 2013.

Errors and Omissions Insurance

Most advisors buy Errors & Omissions insurance, but it is more important to prevent the need to use it in the first place. LifeHealthPro offers ten tips to keep you and your business safe in a litigious market:  

1. Be a consummate professional.

2. Do your research.

3. Stay in your expertise area.

4. Solicit business properly.

5. Practice full disclosure. 

6. Do thorough fact finding. 

7. Link your recommendations to documented needs. 

8. Educate clients about what they bought. 

9. Leave a paper trail. 

10. Promptly resolve client complaints.

See Harry Lew, 10 Tips to Prevent an E&O Claim, LifeHealthPro, Jan. 17, 2013. 

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.)) for bringing this article to my attention.